Karnataka exempts IT from labour law for another 5 years

BANGALORE: Karnataka will exempt information technology companies from an onerous labour law for a further five years, lifting a weight off software firms which have been campaigning against the legislation.

Top industry executives welcomed the decision of the cabinet last week, just ahead of the state's premier information technology event starting on Tuesday.

The IT sector in Karnataka was exempt from the Industrial Employment (Standing Orders) Act, 1946 for the past 11 years. But the state moved to bring the sector under the law this March, causing dread and despair among the software companies, which were just slowly recovering from a global economic slump.

"The cabinet approved the extension (of the IT sector being exempted from the law) on Thursday and it will continue for probably another five years," said SR Patil, the state's minister for information technology and biotechnology.

The state's information technology and business process outsourcing sector employs close to a million professionals and is expected to clock export revenues of around 1.5 lakh crore in the year to March 2014.

Two of the largest companies in India's technology services sector, Infosys and Wipro, are headquartered in Bangalore, the capital of Karnataka and home to some of the world's most prominent software companies. Numerous multinationals, including IBM, HP, Dell and SAP, have set up base in the city. The decision to prolong the exemption was welcomed by IT experts. They said the decision will free the sector from potential headaches. The experts pointed out that the complex and outdated labour laws were originally designed and more suited for manufacturing sector.

"This is a very prudent step," said Pratik Kumar, executive vice-president and global head of human resources at Wipro, which employs about 1.5 lakh people. "It is also a recognition that each sector is unique and so are the requirements. Law has to be flexible to recognise that."

Under the law, companies were required to define conditions of employment and details such as working hours, wages, attendance, grounds of termination and so on. The companies also had to make these known to employees by displaying the terms on a display board near the main entrance. The terms also had to be approved by labour unions.

Most executives in the industry feared this requirement will lead to unionisation of employees in the sector, which contributes to nearly a quarter of the state's GDP. "We were surprised when the previous government did not give an extension, which was like going back to 'licence raj'," said Ramdas Kamath, senior V-P and member of the executive council at Infosys.